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Evidence of meeting #42 for Public Accounts in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was cost.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Kevin Page  Parliamentary Budget Officer, Library of Parliament
Sahir Khan  Assistant Parliamentary Budget Officer, Expenditure and Revenue Analysis, Office of the Parliamentary Budget Officer, Library of Parliament
Peter Weltman  Senior Director, Expenditure and Revenue Analysis, Office of the Parliamentary Budget Officer, Library of Parliament
Michelle d'Auray  Secretary of the Treasury Board of Canada, Treasury Board Secretariat
Robert Fonberg  Deputy Minister, Department of National Defence
Dan Ross  Assistant Deputy Minister, Materiel, Department of National Defence
François Guimont  Deputy Minister, Deputy Receiver General for Canada, Department of Public Works and Government Services
André Deschamps  Commander, Royal Canadian Air Force, Department of National Defence
Simon Kennedy  Senior Associate Deputy Minister, Department of Industry
Kevin Lindsey  Assistant Deputy Minister, Chief Financial Officer, Finance and Corporate Services, Department of National Defence
Tom Ring  Assistant Deputy Minister, Acquisitions Branch, Department of Public Works and Government Services

9 a.m.

Parliamentary Budget Officer, Library of Parliament

Kevin Page

We don't know the reason for that, sir, other than what you have heard in previous testimony from deputy ministers.

9 a.m.

NDP

Mathieu Ravignat NDP Pontiac, QC

Would it be fair to say there was generally a lack of collaboration from the Department of National Defence with your office?

9:05 a.m.

Parliamentary Budget Officer, Library of Parliament

Kevin Page

I would say, with respect to the original request for information, that we in the committee received some but not all information.

9:05 a.m.

NDP

Mathieu Ravignat NDP Pontiac, QC

Could you be more specific about what other additional information you requested?

9:05 a.m.

Parliamentary Budget Officer, Library of Parliament

Kevin Page

Well, certainly partial information with respect to operating and support costs. Again, we received this information roughly less than a week before we released our document.

9:05 a.m.

Assistant Parliamentary Budget Officer, Expenditure and Revenue Analysis, Office of the Parliamentary Budget Officer, Library of Parliament

Sahir Khan

I would add that two weeks prior to the publication of the report, we had asked for clarification from the department on the partial information we received. Specifically, item number one on the list of a number of items was operating and support. We wanted further clarification on that figure.

9:05 a.m.

NDP

The Chair NDP David Christopherson

You have time for a quick one.

9:05 a.m.

Parliamentary Budget Officer, Library of Parliament

Kevin Page

May I add one point, sir? We also asked for information on their methodology and did not receive it.

9:05 a.m.

NDP

The Chair NDP David Christopherson

Thank you. I appreciate your cooperation.

Mr. Hawn, you have the floor, sir.

9:05 a.m.

Conservative

Laurie Hawn Conservative Edmonton Centre, AB

Thank you, Mr. Chair. I didn't think it was my turn yet, but thank you so much.

Thank you, Mr. Page and your associates, for being here.

I want to go back to the previous question. In your report on the costs of fuel, salaries, and other operating costs, as was attempted to be asked a few moments ago, can you provide the committee with all that methodology and all the information you used in your report, including any correspondence with consultants and so on?

9:05 a.m.

Parliamentary Budget Officer, Library of Parliament

Kevin Page

There's significant disclosure. I don't know what the page number is. Perhaps we can find it in our report on how we estimated operating costs. Again, it's a top-down model. We're using a standard definition of operating and support. We're looking at a 30-year history. Then we're projecting forward for this cost.

9:05 a.m.

Conservative

Laurie Hawn Conservative Edmonton Centre, AB

You can provide all of that information to the committee?

9:05 a.m.

Parliamentary Budget Officer, Library of Parliament

Kevin Page

Absolutely. I'm saying we've provided a report. If you want additional information in terms of our estimates—they are technical in nature, how we extrapolated—we're happy to do that.

9:05 a.m.

Conservative

Laurie Hawn Conservative Edmonton Centre, AB

As well as any correspondence you had with consultants you would have derived that information from—you could provide that?

9:05 a.m.

Parliamentary Budget Officer, Library of Parliament

Kevin Page

Yes, sir.

9:05 a.m.

Conservative

Laurie Hawn Conservative Edmonton Centre, AB

Okay, thank you.

You had the DND costing handbook here. Just to be clear, when you talk about operating costs, is that talking about personnel costs, activation of reserves, overtime costs for civilian employees, and so on? And there are other things listed. Is that total costs, or is that delta for the new piece of equipment, over and above what is already being spent--i.e., for people who are already on salary, and so on?

9:05 a.m.

Parliamentary Budget Officer, Library of Parliament

Kevin Page

Yes, sir. We looked at total costs because we don't really know what's in the fiscal planning framework per se. We had no choice but to do a total-cost basis.

9:05 a.m.

Conservative

Laurie Hawn Conservative Edmonton Centre, AB

Aside from all this, if you were running a business, and you had a key piece of equipment that needed to be replaced, and you are going to look at projecting what it would cost to replace it and so on, and what it would cost to run it, would you be interested in the delta—over operating your current piece of equipment versus the replacement piece of equipment? Because you already have the people there who are operating that old equipment. They can operate the new one, and so on. Would it not make sense to be more interested in the delta? What's already there for the old one is going to be there for the new one. Nothing changes.

9:05 a.m.

Parliamentary Budget Officer, Library of Parliament

Kevin Page

Sir, we were responding to a request that we received to provide an estimate of life-cycle costs, but I would be interested in both. I would be interested in both. As a former fiscal policy officer, I'd be interested in both as well.

9:05 a.m.

Conservative

Laurie Hawn Conservative Edmonton Centre, AB

Now, in terms of the 20 years, you're saying that DND used 20 years. DND has always used 20 years, in my experience with DND. We certainly used that for the CF-18 when that came out. We've used it I think for every capital air program I'm aware of.

The reason for that is, I suggest, in asking you the question, do we know what it's going to cost to operate the CF-18 for 40 years? I think the answer is no, because we're not there yet. The closer we get, the smarter we get.

So as for projecting ahead to operate the F-35 for 20, 30, or 40 years, do we know what the cost of fuel is going to be in 20 years, 30 years, or 40 years?

9:05 a.m.

Parliamentary Budget Officer, Library of Parliament

Kevin Page

Well, sir, it's a very good question. When you go beyond 20 years, are there additional uncertainties, perhaps? I mean, we don't know what the cost of fuel will be in 20 years, but again, this is sort of standard practice to look at life cycle and to use what we deem to be a reasonable life cycle.

May 3rd, 2012 / 9:05 a.m.

Conservative

Laurie Hawn Conservative Edmonton Centre, AB

Yes, I understand that, but what I'm getting at is that the reason DND has used 20 years, in my experience, is because.... I mean, even that is an estimate. Someone called it the wag—to a certain extent, the closer you get, the smarter you get.

But I would suggest that it's not hiding anything or anything else. It's just a matter of there's no confidence at all beyond 20 years, and there's a limited amount of confidence even up to 20 years, because of all the unknowables—the cost of fuel, the missions the airplane will do. When we bought the F-18, we didn't know we'd be in Kosovo, Kuwait, or Libya, for example. There are so many unknowables. So I'm suggesting.... I'm not arguing with you on the technical number and so on, but is it a very useful number?

9:10 a.m.

Assistant Parliamentary Budget Officer, Expenditure and Revenue Analysis, Office of the Parliamentary Budget Officer, Library of Parliament

Sahir Khan

Sir, if I just may say, we're principally trying to respond to our report and our methodology. So your point is well taken. There may be other approaches. But we used 30 years for very specific reasons: because it's the estimated service life based on the U.S. Department of Defense and it also happens to correspond to the useful service life of the F-18.

The other issue is that if you take the service life estimated by Lockheed Martin for the aircraft—8,000 hours divided by the average flying hours—it also gives you a number over 30. A lot of the methodology.... To go to Mr. Saxton's very good question, we consulted with a wide range of experts, including the peer reviewers, the Congressional Budget Office, Queen's University, and the Australian Strategic Policy Institute. This was the advice we got about what's conventional.

When we can appeal to an authority like the U.S. Department of Defense Selected Acquisition Report, we use things that are most conventional, so definitions that come out of the cost analysis guidance procedures, which is the basis of our engagement with our consultants. So we tried to stay as close as we could to those standard practices, in particular since it was U.S. procurement with the U.S defense department's practices.

9:10 a.m.

Conservative

Laurie Hawn Conservative Edmonton Centre, AB

Okay.

9:10 a.m.

NDP

The Chair NDP David Christopherson

Your time has expired, Mr. Hawn. Sorry. Thank you very much.

Madame Blanchette-Lamothe, you have the floor, ma'am.